One of the core amendments that has been proposed is that, from 1 March 2019, all South African individual tax residents will be subject to South African income tax on foreign employment income earned in respect of services rendered outside South Africa. Currently, South African tax residents who are outside South Africa rendering services for their employer for a period exceeding 183 days (60 days of which must be continuous) during any period of 12 months, enjoy an exemption from South African income tax on their foreign employment income (section 10(1)(o)(ii) exemption in the Income Tax Act).

However, National Treasury is of the view that this exemption creates opportunities for double non-taxation in cases where the foreign host country does not tax the individual, or it taxes the individual at a significantly reduced rate. An additional reason given by National Treasury for repealing the exemption is that government employees who work outside South Africa do not qualify for the exemption.

In the Budget earlier this year, it was indicated that the exemption would be adjusted, so that the foreign employment income would only be exempt from tax if the income was subject to tax in the foreign country. However, National Treasury has gone a step further and proposed to remove the exemption completely. Any foreign taxes suffered by the employee would be creditable against the South African tax due on the employee’s foreign income, provided certain requirements are met, for example, proof of the foreign taxes suffered must be available.